Avoid Clause Conflict that Could Expose You to Lawsuits Over Insured Damage

If your lease is like most, it probably has a waiver of claims/subrogation clause that bars you and the tenant (or your insurers) from suing each other for any insured damage. It also probably has an exculpatory clause saying that you won't be liable for any damage, death, or injury arising from an occurrence in your building or center. These two key clauses should work hand in hand. But in many leases we've looked at, a conflict between the two clauses could mean you don't have all of the protection you expected against lawsuits involving insured damage.

We'll explain the conflict between these two clauses and how it might hurt you. Plus we'll show you how to prevent the conflict from occurring. And we'll provide Model Lease Language that you can use in your leases.

How Clauses Conflict

A conflict between these two clauses can occur because of an exception that's often included in the exculpatory clause, says Miami attorney Eric D. Rapkin. The exception says that if the damage, death, or injury arose from an occurrence that was your fault or your agent's fault, you're liable, he says. This exception is common because many tenants demand it and many state laws bar owners from excusing themselves from their own wrongdoing, says Rapkin.

Here's an example of how this exception can create a problem. Suppose a fire in the tenant's space was your fault—say, one of your cleaning workers accidentally sparked it by tossing a match onto papers in the tenant's space. If your lease has both a waiver of claims/subrogation clause and an exculpatory clause with a liability exception, there's a conflict, Rapkin explains. To the extent that the tenant has insurance, does the waiver of claims/subrogation clause protect you from being sued by the tenant? Or are you liable for the full extent of the fire under the exculpatory clause's liability exception?

Keep Protection of Waiver of Claims Clause

To avoid that conflict, Rapkin suggests a two-step strategy that gives priority to the waiver of claims/subrogation clause, says Rapkin. You want the clause that gives you the broader protection—the waiver of claims/subrogation clause—to have priority, he notes.

Step #1: Revise exculpatory clause. Revise the exculpatory clause to say that it's “subject to” the waiver of claims/subrogation clause, says Rapkin. This “subject to” language means that the waiver of claims/subrogation has priority over the exculpatory clause.

To do this, add the italicized language to your lease's exculpatory clause:

Model Lease Language

Subject to Clause [insert # of waiver of claims/subrogation clause] of this Lease, Landlord shall not be liable or responsible for any loss or damage to any property or the death or injury to any person…

Step #2: Revise waiver clause. Add language to the waiver of claims/subrogation clause saying that it must be followed despite—or “notwithstanding”—what any other clause says, notes Rapkin. This means that the waiver of claims/subrogation clause has priority over any clause that conflicts with it (such as the exculpatory clause).

To do this, add the italicized language to your lease's waiver of claims/subrogation clause:

Model Lease Language

Notwithstanding anything in this Lease to the contrary, Tenant hereby waives on behalf of itself and its insurers any and all rights of recovery, claim, action, or cause of action, against Landlord, its agents…

CLLI Source

Eric D. Rapkin, Esq.: Shareholder, Akerman Senterfitt, 350 E. Las Olas Blvd., Ste. 1600, Ft. Lauderdale, FL 33301; (954) 463-2700; erapkin@akerman.com.